Tata, Adani, Essar stare at hefty write-downs
GRAPPLING WITH DEBT
With their Gujarat-based power plants incurring hefty losses, the Adani, Tata and Essar groups are staring at write-downs in the tune of thousands of crores of rupees.
Lenders fear the next wave of non-performing assets will come from the power sector, as many projects became unviable after Indonesia changed its law that made coal imports expensive for these firms.
Tata Power’s Mundra project, under the special purpose vehicle Coastal Gujarat Power, constitutes almost ~18,000 crore of its capital employed, with negative returns till date.
Adani Power’s net worth is ~3,000 crore and has ~49,230 crore of debt (see chart).
The unlisted Essar Power had invested ~2,600 crore in the equity of the Salaiya plant and had ~5,000 crore of debt, bankers said.
Tata Power has been grappling with the Mundra project for quite some time and has informed the stock exchange that, in consultation with lenders, it had made various suggestions, including a possible acquisition of a majority stake by the power procurers.
“The government has facilitated a meeting of all such affected projects and the matter is still under discussion,” it said on Friday.
According to the Sydney-based Institute for Energy Economics and Financial Analysis (IEEFA), Adani Power will have to take a $1 billion (~6,500 crore) write-down for Mundra, on top of the $954 million net loss it reported in 2016-17.
The Adani Power board on June 6 approved “slump sale” of the Mundra project into a separate company, so as to sell a stake in the firm to government-owned discoms.
In a statement to the stock exchanges on Friday, Adani Power said it was exploring various options for the Mundra project, but it did not provide further details.
“All these projects will have to take substantial write-downs. The financial stress is evident, as these companies have offered majority stakes almost free to distribution companies,” said a banker.
After steel and telecom, the next wave of bad loans would come from the power sector, he added.
The fall in solar power rates in India would further push these coalbased power projects to stranded status, the IIEFA said.
Essar Power, which runs a 1,200-Mw plant, wrote to lenders stating it would not be able to service its debt as fuel cost had climbed above its selling price. The account had not become a non-performing asset yet but it would not be able to pay dues to banks in the coming quarters, Essar Power told lenders in May.
The IIEFA said the coal-fired power sector in India was under extreme pressure, given the government’s policy drive to diversify the electricity grid into less emissionsintensive generation, combined with rapid deflation in renewable energy. “Something on the order of $15 billion in coal-fired power unit assets are for sale with no buyers, and the thermal power sector has become a major obstacle to sustainable growth in India,” Tim Buckley, the IIEFA’s director of energy finance studies, Australasia, wrote on June 12.